Minutes of the Telbor Committee Meeting 25 February 2008

Committee members: Sharon Lavi, Harel Cordoba, Roy Stein
Guests: Michal Rot-Levy

1. Roy presented data produced by the information system that the Bank of Israel has developed for monitoring the Telbor quotations. The data show that the contributors have not adequately complied with their commitments to quote. It was agreed that the contributors should create clear working procedures that will make it easier for them to comply with the time frames at which they undertook to quote, as well as to reduce quotations of irregular rates of interest. The Telbor Interest Rate Committee will continue to monitor the quotations and will consider adopting sanctions against contributors who consistently fail to meet their commitments.
2. Based on the commitment to carry out deals, as set by the committee, credit and deposit transactions are carried out for a period of overnight (ON), and hardly any derivative transactions (FRA, as determined by the committee) take place. Apparently, these FRA transactions are not profitable. Against this background, and in order to raise the commitment of the contributing banks that, inter alia, will allow trading in futures contracts based on Telbor interest, it was decided (in the previous meeting of the committee as well) to change the commitment rules for carrying out transactions. After examining several alternatives for deepening this commitment, as was raised in the previous meetings, one preferred alternative was chosen for carrying out transactions longer than ON, as follows: imposing a commitment for an IRS transaction for a year, and a commitment for FRA transactions for periods of 6x3, 9x6, 12x9 months, each for an amount of 50 million shekels. The committee members feel that commitment to these transactions is the most effective, because it will facilitate carrying out transactions and maintaining the high credibility of the quotations without exposing the banks to various credit risks.
3. It was decided to invite all the representatives of the contributing banks to a meeting in order to obtain their reaction to the details of this decision, and to enable them to raise further ideas prior to the members of the committee making a final decision about the new rules regarding the commitment to carry out transactions.
4. The committee has not received further complaints from contributing banks who wished to carry out transactions at the quoted interest rate and were met with no response from the quoting contributor.
5. The Bank of Israel has received the transactions' data in Telbor-based interest derivatives from most of the contributing banks. We appeal to the representatives of the contributing banks to complete the information and clarify problematic data, as we are getting ready to publish the overall data, as we undertook in our letter requesting the data. At the upcoming conference we will announce the order of the contributors that will appear in the Reuters system according to the scale of their activity.
6. The committee has redefined the days on which there is no obligation to quote and no determination of the Telbor rate, based on the days on which the representative exchange rate is not calculated. This will result in greater clarity as to the days on which the obligation to quote applies.